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01st April 2016

Gender Pay Gap Regulations

Under the current ‘Think. Act. Report.’ scheme there is no mandatory obligation for companies to publish their gender pay gap and only seven companies have voluntarily published their data.

Section 78 of the Equality Act 2010 gives the government the power to place an obligation on employers with 250 or more employees to publish their gender pay gap information and the government now wants to implement a mandatory requirement for gender pay data to be published.

The aim is to give employees more confidence in the remuneration process and help employer’s identity new opportunities to increase female participation rates.

The draft ‘Equality Act 2010 (Gender Pay Gap Information) Regulations 2016’ will place an obligation on employers to report their annual overall mean and median gender pay gap across the work place, to identify the extent of any pay gap within the company.

The draft regulations will address claims that the pay gap has barely improved in the past fours years despite the government’s pledge to eradicate it within a generation. The Office of National Statistics suggests that there is a 19.2% pay gap between men’s pay and women’s pay.

Employers will also have the option to publish a narrative to accompany the pay gap information to explain any gap revealed, and this is likely to be strongly encouraged in the guidance accompanying the draft regulations, which the government intends to publish later in 2016.

The government plans to implement the regulations on 1st October 2016 placing an obligation on employers to publish their first gender pay gap report by April 2018.

What is “Pay”?

“Pay” for the purposes of the gender pay gap is broadly defined as basic pay, paid leave, maternity pay, sick pay and most allowances such as car allowances, shift premium pay and bonuses. Overtime payments, expenses, the value to salary sacrifice schemes, benefits in kind, redundancy pay, arrears of pay and tax credits are to be excluded from the calculation.

The draft regulations also require employers to calculate and publish further details on any bonus pay:

  • The difference between the mean bonus payments made to men and women, for those employers that operate a bonus scheme.
  • The number of men and women in each quartile of the employer's pay distribution. This is intended to illustrate whether female employees are concentrated in a particular manner in terms of their remuneration, which would potentially indicate impediments to career progression.

Who will the regulations apply to?

The reporting requirement will apply to all private and voluntary sector employers in England, Wales and Scotland that have 250 or more employees who ordinarily work in Great Britain and whose contracts are governed by UK legislation.

When will the regulations apply?

The regulations are scheduled to take effect on 1st October 2016 and Employers will be required to prepare a detailed pay gap information must be calculated and published before April 2018.

Summary

Whilst the proposed first reporting does not have to take place until April 2018, employers should start the calculation process now in order to discover the extent of any gender pay gap. This will give a proactive employer the chance to improve their position in time for their first report.

The pay analysis will take time to undertake and larger employers with complex pay structures will need to start the analysis now to find the level of any pay gap and then they can consider what steps should be taken to lesser the gap.

The government do not intend to create any civil penalties for non-compliance. However they will keep this position under review in light of employers’ willingness to comply with the reporting requirements during the first few years of implementation. It is worth noting that the government do have power under S78 of the Equality Act 2010 to introduce enforcement measures if needs be.

*All information is correct at the time of publishing

Chris Boyle

Napthens LLP – Employment Law Specialist

Chris is head of Napthens’ employment law team. He acts for businesses on a full range of employment law issues ranging from day to day HR advice through to Employment Tribunal claims including unfair dismissal, discrimination, TUPE and breach of contract. He also deals with commercial agents’ disputes and High Court breach of contract claims. Chris acts for all types of businesses and organisations from SMEs through to public companies, across industry sectors and also acts for individual directors and senior employees.

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